**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549**

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**FORM 10-QSB**

| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| | ---------------------------------------------------------------------------------------
| | For the quarterly period ended June 30, 2003                                           
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934     
| | For the transition period from ____________ to _____________.                          



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|Delaware(State or other jurisdiction of
 incorporation or organization)   |  | 34-1870418(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------- |  | ----------------------------------------------
|55 North Main Street, Niles, Ohio(Address of principal executive offices) |  | 44446 (Zip Code)                              

Issuer's telephone number, including area code: (330) 652-2539

Shares of common stock, par value $.01 per share, outstanding as of July 23, 2003: 1,425,598

Transitional Small business Disclosure Format (check one): Yes       No

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**PART I - FINANCIAL INFORMATION**

**Item 1.	     Financial Statements**



|                                                                                     | June 30,
2003 | December 31,2002
|------------------------------------------------------------------------------------ | ------------- | ----------------
|                                                                                     | (Unaudited)   |                 
|ASSETS                                                                              
|                                                                                     |               |                 
|Cash and cash equivalents:                                                           |               |                 
|Noninterest  bearing                                                                 | $    864      | $ 1,542         
|Interest bearing                                                                     | 6,406         | 8,438           
|Total cash and equivalents                                                           | 7,270         | 9,980           
|Securities available for sale - 
   at
market                                        | 50,630        | 44,734          
|Securities to be held to maturity - 
   at cost                                      | 751           | 3,349           
|Loans receivable, net of allowance
   for
loan losses of $762 and $762               | 38,733        | 40,205          
|Accrued interest receivable                                                          | 731           | 758             
|Federal Home Loan Bank stock, at cost                                                | 1,073         | 1,053           
|Real estate investment, limited
partnership -  
  at equity                          | 152           | 163             
|Prepaid expenses and other assets                                                    | 130           | 46              
|Prepaid federal income taxes                                                         | 238           | 13              
|Premises and equipment, at cost less
  accumulated depreciation                      | 307           | 334             
|                                                                                    
|TOTAL ASSETS                                                                         | $100,015      | $100,635        
|                                                                                    
|LIABILITIES                                                                         
|****                                                                                
|Deposits                                                                             | $62,001       | $60,895         
|Accrued interest payable                                                             | 130           | 145             
|Accounts payable and other liabilities                                               | 659           | 1,282           
|Federal Home Loan Bank advances                                                      | 19,500        | 19,500          
|Deferred federal income tax liability                                                | 434           | 480             
|TOTAL LIABILITIES                                                                    | 82,724        | 82,302          
|                                                                                     |               |                 
|SHAREHOLDERS' EQUITY****                                                            
|****                                                                                
|Preferred stock, $.01 par value, authorized
  500,000 shares; none outstanding       | -             | -               
|Common stock, $.01 par value, authorized
  6,000,000 shares; 1,754,411 shares issued | 18            | 18              
|Paid in capital                                                                      | 6,888         | 6,888           
|Retained earnings                                                                    | 13,920        | 13,766          
|Net unrealized gains on securities 
  available for sale                             | 1,527         | 2,013           
|Common stock purchased by the Employee                                               |               |                 
|Stock Ownership Plan                                                                 | (819)         | (819)           
|Treasury stock - 332,753 shares and
    288,641 shares                               | (4,243)       | (3,533)         
|TOTAL SHAREHOLDERS' EQUITY                                                           | 17,291        | 18,333          
|                                                                                     |               |                 
|TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY                                           | $100,015      | $100,635        
|****                                                                                

SEE ACCOMPANYING NOTES

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|                                                    | Three Months Ended
June 30 | Six Months Ended
June 30
|--------------------------------------------------- | -------------------------- | ------------------------
|                                                    | 2003                       | 2002                    
|                                                    |                            |                         
|Interest income:                                    |                            |                         
|Loans receivable                                    |                            |                         
|First mortgage loans                                | $616                       | $670                    
|Consumer and other loans                            | 31                         | 38                      
|Mortgage-backed and related securities              | 255                        | 139                     
|Investments                                         | 404                        | 576                     
|Interest-bearing deposits                           | 22                         | 28                      
|TOTAL INTEREST INCOME                               | 1,328                      | 1,451                   
|                                                    |                            |                         
|Interest expense:                                   |                            |                         
|Deposits                                            | 314                        | 436                     
|Borrowings                                          | 222                        | 222                     
|TOTAL INTEREST EXPENSE                              | 536                        | 658                     
|                                                   
|NET INTEREST INCOME                                 | 792                        | 793                     
|                                                   
|Provision for loan losses                           | -                          | 24                      
|                                                   
|                                                    |                            |                         
|NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES | 792                        | 769                     
|                                                   
|Noninterest income:                                
|Gain on sale of securities                          | 30                         | 38                      
|Service fees and other income                       | 9                          | 12                      
|TOTAL NONINTEREST INCOME                            | 39                         | 50                      
|                                                   
|Noninterest expense:                                |                           
|Equity in loss of limited partnership               | 11                         | 14                      
|General and administrative:                         |                            |                         
|Compensation and benefits                           | 260                        | 275                     
|Occupancy and equipment                             | 20                         | 20                      
|Federal deposit insurance premiums                  | 3                          | 2                       
|Legal and audit                                     | 44                         | 52                      
|Franchise taxes                                     | 45                         | 42                      
|Other operating expense                             | 94                         | 80                      
|TOTAL NONINTEREST EXPENSE                           | 477                        | 485                     
|                                                    |                            |                         
|                                                   
|INCOME BEFORE INCOME TAXES                          | 354                        | 334                     
|                                                   
|Federal income taxes                                | 105                        | 97                      
|NET INCOME                                          | $ 249                      | $ 237                   
|EARNINGS PER SHARE                                  | $ 0.19                     | $ 0.17                  
|DILUTED EARNINGS PER SHARE                          | $ 0.18                     | $ 0.17                  

SEE ACCOMPANYING NOTES.****

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|                                             | Six Months Ended June 30,
|-------------------------------------------- | -------------------------
|                                             | 2003                     
|                                             |                          
|Net income                                   | $   523                  
|Other comprehensive income:                 
|Unrealized gains (losses) on securities:    
|Unrealized gains (losses) arising for period | (659)                    
|Related income tax                           | (224)                    
|                                             | (435)                    
|****                                        
|Reclassification adjustment:                
|Gain included in net income                  | (78)                     
|Related income tax                           | 27                       
|                                             | (51)                     
|Other comprehensive income                   | (486)                    
|****                                        
|COMPREHENSIVE INCOME                         | $ 37                     

****SEE ACCOMPANYING NOTES.

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|                                                                                                              | Six Months Ended June 30,
|------------------------------------------------------------------------------------------------------------- | -------------------------
|                                                                                                              | 2003                     
|                                                                                                              |                          
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                          | ****                     
|Net income                                                                                                    | $  523                   
|                                                                                                             
|Adjustments to reconcile net income to net cash
   provided by operating activities ****                      | ****                     
|Deferred income taxes                                                                                         | 204                      
|Depreciation                                                                                                  | 13                       
|****      Amortization of deferred loan fees and costs                                                        | (9)                      
|Amortization of discounts and premiums on
      investments and mortgage-backed and
       related securities | 9                        
|Gain on sale of securities                                                                                    | (78)                     
|Loss on sale of equipment                                                                                     | 10                       
|Equity in loss of limited partnership                                                                         | 11                       
|Provision for loan losses                                                                                     | -                        
|Federal Home Loan Bank stock dividends                                                                        | (21)                     
|                                                                                                              | 662                      
|Net increase in accrued interest receivable, 
   prepaid expenses and other assets                            | (283)                    
|Net increase (decrease) in accrued interest,
   accounts payable and other liabilities                        | (637)                    
|NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                                           | (258)                    
|                                                                                                             
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                         
|Proceeds from sale of securities available for
sale                                                           | 3,985                    
|Purchase of FHLB stock                                                                                        | -                        
|Purchase of securities available for sale                                                                     | (25,204)                 
|Proceeds from maturity of securities available
   for sale                                                    | 14,654                   
|Proceeds from principal payments on
  mortgage-backed and related securities                                  | 2,599                    
|Net (increase) decrease in interest-bearing
  deposits with banks                                             | 2,809                    
|Net (increase) decrease in loans                                                                              | 1,481                    
|Proceeds from sale of equipment                                                                               | 7                        
|Additions to premises and equipment                                                                           | (3)                      
|NET CASH PROVIDED BY INVESTING ACTIVITIES                                                                     | 328                      
|****                                                                                                         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                         
|                                                                                                             
|Net increase (decrease) in savings accounts,
  MMDAs and NOW accounts                                         | (497)                    
|                                                                                                             
|Net increase (decrease) in certificates of
  deposits                                                         | 1,603                    
|Purchase of treasury shares                                                                                   | (709)                    
|Cash dividends paid on common stock                                                                           | (369)                    
|Common stock options exercised                                                                                | -                        
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                     | 28                       
|                                                                                                             
|NET INCREASE IN CASH                                                                                          | 98                       
|                                                                                                             
|CASH AT BEGINNING OF PERIOD                                                                                   | 766                      
|                                                                                                             
|CASH AT END OF PERIOD                                                                                         | $  864                   
|                                                                                                             
|Cash paid during the period for:                                                                             
|Interest                                                                                                      | $1,110                   
|Income taxes                                                                                                  | $  130                   
|                                                                                                             

SEE ACCOMPANYING NOTES

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****NOTES TO FINANCIAL STATEMENTS
FIRST NILES FINANCIAL, INC. AND SUBSIDIARY
June 30, 2003 and 2002 (Unaudited)

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies followed by First Niles Financial, Inc.
("First Niles") are in accordance with accounting principles generally accepted in the United States of America and conform to general
practices within the savings and loan industry.

The accompanying unaudited financial statements were prepared in accordance with
instructions for Form 10-QSB and, therefore do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America.  Management believes that all normal
recurring adjustments that are necessary for a fair presentation of interim
period financial information have been reflected in these financial statements.
The results of operations for the interim periods discussed herein are not
necessarily indicative of the results that may be expected for a full year.
These interim financial statements should be read in conjunction with the
consolidated financial statements and notes included in the First Niles
Financial, Inc. Annual Report on Form 10-KSB for the year ended December 31,
2002.

NOTE B -- STOCK CONVERSION

On October 26, 1998, First Niles began trading as a public company on the Nasdaq
SmallCap Market.  First Niles issued 1,754,411 shares, $.01 par value common
stock, at $10.00 per share, raising $15.5 million, net of shares acquired by the
newly formed Employee Stock Ownership Plan (the "ESOP") and net of the costs of
the conversion.  Home Federal Savings and Loan Association of Niles converted
to a federal stock savings and loan association and simultaneously received
proceeds of $8.5 million in exchange for all of its common stock to First Niles.
This transaction was accounted for using historical cost in a manner similar to
that in a pooling of interests.

NOTE C -- EARNINGS PER SHARE



Basic earnings per share is computed by dividing net income by the weighted-average shares outstanding, during the period, less weighted-average shares in
the ESOP that are unallocated and not committed to be released.  Diluted
earnings per share reflect the potential effect of stock options and is
calculated using the treasury stock method.  At June 30, 2003 the market price
of First Niles stock exceeded the exercise price of all outstanding options; the
resulting dilution, however, did not result in a reduction from basic earnings
per share, as rounded to the nearest whole cent for the six month period ended
June 30, 2003, but did result in a reduction for the three month period ended
June 30, 2003.

The following table sets forth the computation of earnings per share for the
three month and six month periods ended June 30, 2003 and June 30, 2002 (income
in thousands):

|                                                   | Three Months Ended
June 30, | Six Months Ended
June 30
|-------------------------------------------------- | --------------------------- | ------------------------
|                                                   | 2003                        | 2002                    
|                                                   |                             |                         
|Net income                                         | $   249                     | $   237                 
|Earnings applicable to basic
   earnings per share | 249                         | 237                     
|Average common shares                              | 1,428,239                   | 1,512,568               
|Less average unallocated
   ESOP shares            | 103,730                     | 122,752                 
|Average common shares
  outstanding - basic        | 1,324,509                   | 1,389,816               
|Average common shares
  outstanding - diluted      | 1,351,380                   | 1,411,107               
|Earnings per share - basic                         | $0.19                       | $0.17                   
|diluted                                            | $0.18                       | $0.17                   

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|**Item 2.** | **Management's Discussion and Analysis of Financial Condition and
Results of Operations**
|----------- | -----------------------------------------------------------------------------------------

**General**

First Niles Financial, Inc., a Delaware corporation, was formed in July 1998 to act as the holding
company for Home Federal Saving and Loan Association of Niles upon the completion of Home
Federal's conversion from mutual to stock form.  The conversion was completed on October 26, 1998.
All references to First Niles or Home Federal, unless otherwise indicated, on or before October 26,
1998, refer to Home Federal before its conversion from mutual to stock form.  References in this Form
10-QSB to "we", "us", and "our" refer to First Niles and/or Home Federal as the context requires.

Our principal business consists of attracting retail deposits from the general public and investing those
funds primarily in permanent and construction loans secured by first mortgages on owner-occupied,
one-to-four family residences.  We also originate, to a lesser extent, loans secured by first mortgages
on non-owner-occupied one-to-four family residences, permanent and construction commercial and
multi-family real estate loans, and consumer loans.  Excess funds are generally invested in investment
securities and mortgage-backed and related securities.  Additionally, we borrow funds from the FHLB
and reinvest the proceeds in investment securities at favorable interest rate spreads.

The following discussion compares our consolidated financial condition at June 30, 2003 to December
31, 2002 and the results of operations for the three month and six month periods ended June 30, 2003
with the comparative periods ended June 30, 2002.  This discussion should be read in conjunction with
the consolidated financial statements and footnotes included herein.

**Changes in Financial Condition at June 30, 2003 and December 31, 2002**

Total assets decreased by $620,000, or 0.6%, to $100.0 million at June 30, 2003 from $100.6 million
at December 31, 2002.  This decrease was primarily due to a $1.5 million decline in the loan portfolio
as a result of accelerated principal prepayments.  Funds received from loan repayments and existing
cash were invested in securities, which increased $3.3 million to $51.4 million at June 30, 2003.  The
new securities were primarily shorter duration investments as compared to longer term loans and
securities they replaced in order to better position the Company for anticipated higher interest rates.

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Deposits increased $1.1 million during this six month time period.  The increase in deposits was
comprised of a $1.6 million increase in certificates of deposit, partially offset by a $497,000 decrease
in savings accounts and NOW accounts.  Management perceives that the increase in deposits during
the time period is primarily attributable to its decision to maintain deposit interest rates at levels
generally higher than the local competition.  This strategy is designed to gain market share in a low
interest rate environment.

Shareholders' equity at June 30, 2003 was $17.3 million, a $1.0 million, or 5.7% decrease from
December 31, 2002.  The decrease in shareholders' equity was primarily the result of a $486,000
decrease in net unrealized gains on securities available for sale and a $709,000 increase in treasury
shares, partially offset by a $154,000 increase in retained earnings.  Retained earnings were reduced
from higher levels during the period by the payment of $369,000 in dividends on common stock.  The
company repurchased 44,112 of its shares during the six month period ended June 30, 2003 at an
average price of $16.07.

A portion of the repurchase of the aforementioned shares completed the 5.0% share repurchase
program originally authorized in July 2002.  During May, 2003, the Company's Board of Directors
authorized another 12-month share repurchase program, up to a maximum of 5.0%, or 71,612 shares,
of the total outstanding shares of the Company.

Book value per common share was $12.16 at June 30, 2003, compared to $12.51 at December 31,
2002.  The dividend paid during each the first two quarters was equivalent to $0.14 per common share.
At June 30, 2003 and December 31, 2002, there were 1,421,658 and 1,465,770 shares of common
stock outstanding, respectively.

Nonperforming loans, consisting of nonaccruing loans and loans delinquent more than 90 days, totaled
$1.1 million at June 30, 2003, or 2.8% of net loans receivable, compared to $1.5 million, or 3.8% of
net loans receivable at December 31, 2002.  The allowance for loan losses was $762,000 at June 30,
2003, representing coverage of 69.7% of non-performing loans and 2.0% of net loans receivable.  At
December 31, 2002, the allowance for loan losses was also $762,000, represented coverage of 50.2%
of nonperforming loans and 1.9% of net loans receivable.  Management believes that the current level
of the allowance for loan losses remains adequate to absorb losses resulting from uncollectible loans.
At June 30, 2003 and December 31, 2002 we had no foreclosed assets.

**Results of Operations for the Three-Month Period Ended June 30, 2003 as Compared to June
30, 2002**

**General.**Our results of operations depend primarily on our net interest income, which is determined
by (i) the difference between interest earned on interest-earning assets, consisting primarily of
mortgage loans, collateralized mortgage obligations, other investments and interest-bearing deposits
in other institutions, and interest expense on interest-bearing liabilities, primarily deposits and
borrowings, and (ii) the relative amounts of our interest-earning assets and interest-bearing liabilities.
The level of non-interest income, such as fees received from customer deposit account service charges
and gains on sales of investments, and the level of non-interest expense, such as federal deposit

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**Net Income.**For the three months ended June 30, 2003, First Niles recorded net income of $249,000,
as compared to $237,000 for the same period in 2002, an increase of $12,000, or 5.1%   The increase
in net income in the current quarter was primarily the result of a decrease in the provision for loan
losses and a decrease in noninterest expense as explained below.  Our annualized return on average
assets was 0.99%, unchanged from the comparative period one year ago.  The annualized return on
shareholders' equity for the three months ended June 30, 2003 was 5.66% compared to 5.47% for the
three months ended June 30, 2002.   Earnings per share and diluted earnings per share for the three
months ended June 30, 2003 was $0.19 and $0.18, respectively, as compared to $0.17 and $0.17 for
the same three month period in 2002.

**Net Interest Income.**Net interest income decreased by $1,000, or 0.1%, for the three month period
ended June 30, 2003 as compared to the respective 2002 period.  For the three months ended June 30,
2003 the interest rate spread was 2.74% as compared to 2.79% for the same period one year prior.  The
net interest margin for the current period was 3.21%, as compared to 3.40% for the same period one
year ago.

For the three months ended June 30, 2003 total interest income decreased by $123,000, or 8.5%, as
compared to the same period in 2002.  Specifically, interest income on loans receivable, investments
and interest bearing deposits decreased a collective $239,000 for the three month period ended June
30, 2003 as compared to the same period in 2002.  A $116,000 increase in interest on mortgage-backed
and related securities for the three month period ended June 30, 2003 as compared to the same period
in 2002 partially offset the aforementioned decrease.   The yield on total earnings assets for the current
quarter was 5.39%, as compared to 6.22% for the comparative quarter one year ago, a decline of 83
basis points.

Total interest expense decreased by $122,000, or 18.5%, as compared to the same period one year
prior.   Total interest on deposits also decreased $122,000 from period to period.  The cost of funds
for the quarter ended June 30, 2003 was 2.65%, as compared to 3.43% for the quarter ended June 30,
2002, a 78 basis point decrease.

The decreases effecting both the asset and liability sides of the balance sheet as described above were
generally attributable to the continued downward movement in market interest rates experienced
during the past year.

The cost of funds would have decreased further if not for the Company's borrowings from the FHLB.
The cost of these borrowings were 4.58% at June 30, 2003, unchanged from June 30, 2002.  These
borrowings were obtained for subsequent reinvestment into investment securities (leverage strategy)
and participation loans as they become available.  The resulting net interest rate spread

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**Provision for Loan Losses**.  For the three months ended June 30, 2003 the Company had no provision for loan
losses compared to $24,000 for the same period in 2002.  This decline is generally attributable to a stabilization
in the overall asset quality of our loan portfolio.   The provision for loan losses is a result of management's
periodic analysis of risks  inherent in our loan portfolio from time to time, as well as the adequacy of the
allowance for loan losses.  It is our policy to provide valuation allowances for estimated losses on loans based
upon past loss experience, current trends in the level  of delinquent and specific problem loans, loan
concentrations to single borrowers, adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current and anticipated economic conditions in our market
area.  Accordingly, the calculation of the adequacy of the allowance for loan losses is not based directly on the
level of non-performing assets.

Management will continue to monitor the allowance for loan losses and make future  additions to the allowance
through the provision for loan losses as economic conditions dictate.  Although we maintain the allowance for
loan losses at a level which we consider to be adequate to provide for losses, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions for  loan losses will not be
required in future periods.  In addition, management's determination as to the amount of the allowance for loan
losses is subject to review  by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation,
as part of their examination process, which may result in the establishment of an additional allowance.

**Noninterest Income**.  Noninterest income of $39,000 for the three months ended June 30, 2003 was $11,000
lower than during the same period in 2002.  This decrease was essentially the result of a $8,000 decrease in gain
on sale of investment securities in the current quarter as compared to previous comparative quarter.  Service
fees and other income decreased by $3,000 during the current quarter as compared to the same quarter in 2002.

**Noninterest Expense**.  Noninterest expense decreased $8,000, or 1.6%, for the three months ended June 30,
2003 as compared to the same period in 2002.  This decrease was primarily attributable to a $15,000 decrease
in compensation expense related to the retirement of one of the Company's executive officers, partially offset
by routine salary increases and higher health insurance costs.  The Company is considering hiring an additional
loan officer.  The addition of this employee would result in an increase in compensation expense in future
financial reporting periods.  Additionally, legal and audit expenses were $8,000 lower in the current quarter as
compared to the same quarter one year ago.  These decreases were partially offset by a $14,000 increase in
other operating expense.

**Federal Income Taxes**.  The provision for federal income taxes increased by $8,000 in the three months ended
June 30, 2003 as compared to the same period in 2002, resulting in an income tax

---

**Results of Operations for the Six-Month Periods Ended June 30, 2003 as Compared to June 30, 2002**

**Net Income.**First Niles recorded net income of $523,000 for the six months ended June 30, 2003.  The
increase in net income was comprised of a $54,000 decrease in the provision for loan losses, a $50,000 increase
in net interest income, a $33,000 decrease in noninterest expense and a $34,000 increase in noninterest income
partially offset by a $62,000 increase in federal income tax expense.  Our annualized return on average assets
for the six-month period ended June 30, 2003 was 1.04%, compared to 0.86% for the same period one year ago.
Our annualized return on average shareholders' equity was 5.87% for the six months ended June 30, 2003  as
compared to 4.70% for the same period one year ago.  Net income increased by $109,000, or 26.3% for the six
months ended June 30, 2003 as compared to the six months ended June 30, 2002.    Earnings per share, on a
basic and diluted basis, for the six months ended June 30, 2003 was $0.39 and $0.39, respectively, as compared
to $0.30 and $0.29 for the same six month period in 2002.

**Net Interest Income.**Net interest income increased by $50,000, or 3.2% for the six months ended June 30,
2003 as compared to the respective 2002 period.  For the six months ended June 30, 2003 total interest income
decreased by $201,000 and total interest expense decreased by $251,000 as compared to the same period in
2002.  For the six months ended June 30, 2003, the interest rate spread was 2.71% as compared to 2.63% for
the six months ended June 30, 2002.   For the six months ended June 30, 2003 the net interest margin was
3.22% as compared to 3.29% for the six months ended June 30, 2002.  For the six months ended June 30, 2003
the yield on interest earning assets was 5.44% as compared to 6.16% for the six months ended June 30, 2002,
a decline of 72 basis points.  The overall cost of funds was 2.73% for the six months ended June 30, 2003 as
compared to 3.53% for the same period in 2002, a decline of 80 basis points.  A significant decrease in market
interest rates was the primary reason for the decline in the yield on interest earning assets as well as the decline
in our overall cost of funds.

**Provision for Loan Losses.**  The Company had no provision for loan losses for the six months ended June 30,
2003, as compared to $54,000 in the six months ended June 30, 2002.  ****

**Noninterest Income.**Noninterest income totaled $96,000 for the six months ended June 30, 2003 as compared
to $62,000 during the same period in 2002.  Most of this increase was attributable to an $41,000 increase in gain
on sale of investment securities in the current period as compared to the prior comparative period.  Gain on sale
of investment securities was $78,000 for the six months ended June 30, 2003 as compared to $37,000 for the
six months ended June 30, 2002.  This increase was partially offset by a $7,000 decline in service fees and other
income on a comparative period basis.

---

**Noninterest Expense.**Noninterest expense decreased $33,000, or 3.4%, for the six months ended June 30,
2003 as compared to the same period one year earlier.  Equity in loss of limited partnership, legal and audit fees
and compensation and benefits decreased by $25,000, $20,000 and $6,000, respectively.  Partially offsetting
these decreases was an $16,000 increase in other operating expense.

**Federal Income Taxes.**The provision for federal income taxes increased by $62,000 for the six months ended
June 30, 2003 as compared to the same period in 2002.  The increase in the provision for federal income taxes
was primarily due to an increase in pre-tax income of $171,000.   The effective tax rate was 30.0% for the six
month period ended June 30, 2003 compared to 28.1% in the same period one year earlier.  The above effective
tax rates differ from the statutory rate of 34% primarily due to our ownership interest in a low income housing
tax credit program.  The tax credits from this program are expected to last through 2006.

**Liquidity and Capital Resources**

Our main source of funds are deposits, and loan and securities repayments.  While scheduled loan repayments
and maturing investments are relatively predictable, deposit flows and loan prepayments are more influenced
by interest rates, general economic conditions and competition.  Safe and sound banking practices require us
to maintain cash and eligible investments at levels that assure our ability to meet demands for deposit
withdrawals and the repayment requirements of short-term borrowings, if any.  We believe that sufficient funds
are available for us to meet our current liquidity needs.  Total cash and cash equivalents amounted to $7.3
million at June 30, 2003.

We use our capital resources to meet ongoing commitments to fund various types of deposit withdrawals, to
invest in securities, to fund existing and future loan commitments, to maintain liquidity, and to meet operating
expenses.  At June 30, 2003 we had outstanding commitments to extend credit or purchase securities, totaling
$6.7 million, including $2.2 million of unused consumer lines of credit.

Home Federal is required to maintain minimum regulatory capital sufficient to meet tangible, core and risk-based capital ratios of  1.5%, 3.0% and 8.0%, respectively.  As of June 30, 2003, Home Federal significantly
exceeded its regulatory capital requirements, with tangible, core, and risk-based capital ratios of 15.32%,
15.32% and 40.15%, respectively.

**Cautionary Forward-looking Statements**

This document, including information incorporated by reference, contains, and future filings by First Niles
Financial, Inc. on Form 10-KSB, Form 10-QSB, and Form 8-K and future oral and written statements by First
Niles and its management may contain, forward-looking statements about First Niles and its subsidiary which
we believe are within the meaning of the Private Securities Litigation Reform Act of 1995.  These
forward-looking statements include, without

---

The following factors, many of which are subject to change based on various other factors beyond our control,
could cause our financial performance to differ materially from the plans, objectives, expectations, estimates
and intentions expressed in such forward-looking statements:

- the strength of the United States economy in general and the strength of the   local economies
in which we conduct operations;
- the effects of, and changes in, trade, monetary and fiscal policies and laws,   including interest
rate policies of the Federal Reserve Board;
- the financial markets interest rate and monetary fluctuations particularly the relative  relationship
of short-term interest rates to long-term interest rates;
- the timely development of and acceptance of new products and services of Home Federal and
the perceived overall value of these products and services by users, including the features,
pricing and quality compared to competitors' products  and services;
- the willingness of users to substitute competitors' products and services for our products and
services;
- the impact of changes in financial services' laws and regulations (including laws  concerning
taxes, banking, securities and insurance);
- the impact of technological changes;
- acquisitions;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in the foregoing.

---

**Item 3.   Controls and Procedures**

An evaluation of the Company's disclosure controls and procedures (as defined in Section 13(a)-15(e)
of the Securities Exchange Act of 1934 (the "Exchange Act") as of June 30, 2003, was carried out under the
supervision and with the participation of the Company's Chief Executive Officer, Principal Financial Officer
and several other members of the Company's senior management.  The Company's Chief Executive Officer
and Principal Financial Officer concluded that the Company's disclosure controls and procedures as currently
in effect are effective in ensuring that the information required to be disclosed by the Company in the reports
it files or submits under the Exchange Act is (i) accumulated and communicated to the Company's management
(including the Chief Executive Officer and Principal Financial Officer) in a timely manner and (ii) recorded
processed, summarized and reported within the time periods specified in the SEC's rules and forms.  There have
been no changes in our internal control over financial reporting (as defined in RULE 13a-15(f) of the Act) that
occurred during the quarter ended June 30, 2003, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

The Company intends to continually review and evaluate the design and effectiveness of its disclosure
controls and procedures and to improve its controls and procedures over time and to correct any deficiencies
that it may discover in the future.  The goal is to ensure that senior management has timely access to all material
non-financial information concerning the Company's business.  While the Company believes the present design
of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may
cause the Comapny to modify its disclosure controls and procedures.

**PART II - OTHER INFORMATION**

|**Item 1.** | **Legal Proceedings:**                                                                                                                                                                                                                                                                                                                                                                                                    
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            | There are no matters required to be reported under this item.                                                                                                                                                                                                                                                                                                                                                             
|**Item 2.** | **Changes in Securities:**                                                                                                                                                                                                                                                                                                                                                                                                
|            | There are no matters required to be reported under this item.                                                                                                                                                                                                                                                                                                                                                             
|**Item 3.** | **Defaults Upon Senior Securities:**                                                                                                                                                                                                                                                                                                                                                                                      
|            | There are no matters required to be reported under this item.                                                                                                                                                                                                                                                                                                                                                             
|**Item 4.** | **Submission of Matters to a Vote of Security Holders:**                                                                                                                                                                                                                                                                                                                                                                  
|            | The annual meeting of shareholders of First Niles was held on April 16, 2003 at
our office in Niles, Ohio.  At that meeting the shareholders were asked to vote
upon (i) the election of Directors William L. Stephens and Leonard T. Gantler,
and (ii) the appointment of Anness, Gerlach & Williams as independent
accountants for the fiscal year ending December 31, 2003.  The voting on such
matters was as follows:

---

| | Director Election:
| | ------------------

|     |                                                                                                                                               | Votes For     | Votes Withheld****
|---- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ------------------
|**** | ****Director Stephens                                                                                                                         | 1,296,334     | --                
|     | ********Director Gantler                                                                                                                      | 1,295,252**** | ****--****        
|     | Directors not subject to election at the annual meeting and continuing in office
are William S. Eddy, Paul J. Kramer and Ralph J. Zuzolo, Sr.

| | Independent Auditor Ratification:
| | ---------------------------------
| |                                  
| | Anness, Gerlach & Williams       

|**Item 5.** | **Other Information:**                                                                                                                                   
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|            | There are no matters required to be reported under this item.                                                                                            
|**Item 6.** | **Exhibits and Reports on Form 8-K:**                                                                                                                    
|            | (a)                                                                                                                                                      
|            |                                                                                                                                                          
|            | (b)                                                                                                                                                      
|            | On April 15, 2003, the Registrant filed a current Report on Form 8-K containing a press
release announcing earnings for the quarter ended March 31, 2003.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|      |                 |  |     | FIRST NILES FINANCIAL, INC.
Registrant                                                                               
|----- | --------------- |  | --- | ---------------------------------------------------------------------------------------------------------------------
|     
|     
|Date: | August 14, 2003 |  | By: | /s/ William L. Stephens 
William L. Stephens
President and Chief Executive Officer
*(Duly Authorized Representative)*
|     
|     
|     
|Date: | August 14, 2003 |  | By: | /s/ Thomas G. Maley
Thomas G. Maley
Controller
(Principal Accounting Officer)                                        

---



|Number | Document                                                                                                                                                                                                                                                                                                        
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3      | The Certificate of Incorporation and Bylaws, filed on July 10, 1998 as Exhibits
3.1 and 3.2, respectively, to Registrant's Registration Statement on Form SB-2
(File No.333-58883), are incorporated by reference.                                                                                              
|4      | Registrant's Specimen Stock Certificate, filed on July 10, 1998 as Exhibit 4 to
Registrant's Registration Statement on Form SB-2 (File No.333-58883), are
incorporated by reference.                                                                                                                            
|10.1   | Employment Agreement between Registrants operating bank subsidiary and
William L. Stephens, George J. Swift and Lawrence Safarek filed as Exhibits
10.1, 10.2 and 10.3 to Registrant's Report on Form 10-KSB for the fiscal year
ended December 31, 1998 (File No.0-24849), is incorporated herein by
reference.
|10.2   | Registrant's 1999 Stock Option and Incentive Plan, filed on November 12, 1999
as Appendix A to Registrant's Proxy Statement on Schedule 14A (FILE No. 0-24849), is incorporated herein by reference.                                                                                                            
|10.3   | Registrant's 1999 Recognition and Retention Plan filed on November 12, 1999
as Appendix B to Registrant's Proxy Statement on Schedule 14A (FILE No. 0-24849), is incorporated herein by reference.                                                                                                              
|11     | Statement re computation of earnings per share (see Note C of the Notes to
Financial Statements included in this Form 10-QSB).                                                                                                                                                                                  
|31.1   | Certification Required by Securities Exchange Act of 1934 Rule 13a-14(a)
(Chief Executive Officer)                                                                                                                                                                                                              
|31.2   | Certification Required by Securities Exchange Act of 1934 Rule 13a-14(a)
(Chief Financial Officer)                                                                                                                                                                                                              
|32     | Section 1350 Certifications